Be Sure To Check Out Teikoku Electric Mfg.Co.,Ltd. (TSE:6333) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Teikoku Electric Mfg.Co.,Ltd. (TSE:6333) is about to go ex-dividend in just four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Teikoku Electric Mfg.Co.Ltd investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 3rd of December.

The company's next dividend payment will be JP¥55.00 per share, on the back of last year when the company paid a total of JP¥110 to shareholders. Last year's total dividend payments show that Teikoku Electric Mfg.Co.Ltd has a trailing yield of 3.4% on the current share price of JP¥3280.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Teikoku Electric Mfg.Co.Ltd paid out a comfortable 48% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 53% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Teikoku Electric Mfg.Co.Ltd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Teikoku Electric Mfg.Co.Ltd

Click here to see how much of its profit Teikoku Electric Mfg.Co.Ltd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Teikoku Electric Mfg.Co.Ltd, with earnings per share up 8.3% on average over the last five years. Decent historical earnings per share growth suggests Teikoku Electric Mfg.Co.Ltd has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Teikoku Electric Mfg.Co.Ltd has lifted its dividend by approximately 25% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has Teikoku Electric Mfg.Co.Ltd got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Teikoku Electric Mfg.Co.Ltd paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Teikoku Electric Mfg.Co.Ltd is facing. To help with this, we've discovered 1 warning sign for Teikoku Electric Mfg.Co.Ltd that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.